No serious irregularity in shipping arbitration

Posted: 13th February 2013

A dissatisfied party to arbitration proceedings in respect of a contract for the sale of a new-build vessel has failed to convince the Commercial Court that the proceedings were infected by serious irregularity. Arguments that the arbitrators had exceeded or misinterpreted their powers in re-opening the procedure and awarding interest to the opposing party were rejected by the court.

After the buyer and the seller of the vessel had each accused the other of being in repudiatory breach of the contract, each laid claim to the $7.7 million first instalment of the purchase price that had been paid into an escrow account. The arbitrators rejected the buyer’s claims of misrepresentation and breach of contract and held that it had committed repudiatory breaches of the contract which had been accepted by the seller. The panel rejected the seller’s claim to the money in the escrow account but ruled that it was entitled to damages for loss of bargain in the sum of $6 million.

The arbitrators subsequently reconvened and upheld the seller’s plea that it was entitled to an additional award of more than $900,000, that being the interest which had accrued on the money in the escrow account. The buyer challenged that award on the basis that the arbitrators had exceeded or misinterpreted their jurisdiction under section 57 of the Arbitration Act 1996 and that this amounted to a serious irregularity in the proceedings.

Dismissing the buyer’s challenge, the court ruled that the arbitrators were entitled to re-open their determination, having previously ‘overlooked’ the issue of which party was entitled to the accrued interest. Arguments that issues in respect of interest had been fully dealt with at the first hearing and that the seller was entitled to $6 million ‘and no more’ were rejected by the court.